AllianceBernstein on Monday, August 2, reported disappointing second-quarter earnings due to global stock market weakness, with net income at $0.31 per unit versus $0.41 a year ago. Analyst consensus was for earnings of $0.41.
The asset management and research firm said in its second-quarter 2010 news release that stock markets fell during most of the period as investors feared that escalating fiscal troubles in Europe could curtail the world's economic recovery.
Second-quarter profit fell 16%, with net income declining to $32.3 million from $38.3 million, and revenue fell 5% to $688 million from $721 million in the quarter ended June 30, 2009.
"Overall, the second quarter of 2010 was not what we would have liked," said Peter Kraus, chairman and CEO of the New York-based company, an affiliate of French insurer Axa Group, in a statement. "Increased volatility around the globe, caused in large part by the European credit crisis, led many investors to seek safe havens and sell riskier assets--much as we saw in 2008."
AllianceBernstein (AB) shares opened at $26.60 and rose to a high of $27.35, then settled into a range above $27.00 per unit in early afternoon trading.
The market dynamic had an adverse impact on AllianceBernstein's equity services, which generally underperformed benchmarks, Kraus said.
"However," he added, "we feel our equity portfolios are exposed to companies with very attractive cash flows and growth characteristics which should capitalize on global growth. Notably, the performance of our fixed income services remained competitive, resulting in the fourth consecutive quarter of net inflows."
Net Outflows Add to Disappointing Performance
Total assets under management as of June 30 were $458 billion, down $43 billion, or 9%, from March 31, and up $11 billion, or 2%, compared to June 30, 2009.
"During the second quarter of 2010, assets under management decreased as a result of negative investment performance as well as modest net outflows. However, total net outflows of $4.7 billion in the second quarter of 2010 were 28% lower than in the first quarter of 2010 and 81% lower than the second quarter of 2009," according to the release.
Net outflows in the Institutions channel declined to $3.7 billion, or 57% lower than in the first quarter of 2010, due to increased sales. The pipeline of awarded but unfunded institutional mandates decreased slightly to $5.0 billion at June 30, 2010. The Retail channel experienced net outflows of $0.9 billion, compared to net inflows of $2.5 billion in the first quarter of 2010. This change was primarily the result of the inclusion of two large non-US mandate wins in the first quarter as well as increased gross outflows in the second quarter, likely caused in part by the European credit crisis. Net outflows in the Private Client channel were $0.1 billion compared to net outflows of $0.3 billion in the first quarter of 2010.
The 5% decline in net revenues to $688 million was due primarily to substantial losses on deferred compensation-related investments in the second quarter of 2010. However, base fee revenues increased by $63 million to $510 million, or 14% greater than in the second quarter of 2009.
Investment losses of $57 million in the current quarter were primarily due to losses of $37 million on deferred compensation-related investments and $10 million in the consolidated AllianceBernstein Venture Capital Fund.
In other AllianceBernstein news, New York City Mayor Michael Bloomberg named money manager Ranji Nagaswami, to be the city's first chief investment advisor. Nagaswami, a former CIO at AllianceBernstein, a speaker at several Investment Advisor conferences and, more recently, a member of WealthManagerWeb.com's 2010 advisory board for its Top Women in Wealth, will also chair the New York City Employees' Retirement System (NYCERS).Read a story about AllianceBernstein first-quarter 2010 earnings from the archives of InvestmentAdvisor.com.